The Corporations and Markets Advisory Committee (CAMAC) has asked the ASX Corporate Governance Council (the Council) to consider two important recommendations relating to directors and officers trading in company securities.

CAMAC has asked Council to introduce in the ASX Corporate Governance Council Corporate Governance Principles and Recommendations new Recommendations that:

companies be required to adopt clearance procedures for all dealings by director or executive officers in the company’s securities (including the use of securities of the company as collateral for any purpose) or explain why not in accordance with the ‘if not, why not’ reporting requirement. CAMAC recommends that clearance should be obtained from the board, or a person designated by the board, before entering into the dealing and that any approved dealing should be undertaken no later than two business days after receiving clearance
company trading policies prohibit directors and executive officers from transacting in company securities in the period between the close of books and the release of half-year or full-year results and at any other times, at the initiative of the company, when the company is aware of, or has under consideration, a market-sensitive matter (such as an unannounced takeover proposal or other still-confidential negotiation) (blackout periods). Various passive transactions should be exempt from this prohibition. The policy should also permit a director or executive officer to dispose of securities in a blackout period only where that person is not aware of inside information and is in severe financial difficulty or other exceptional circumstances exist.

CAMAC also recommended that, in the absence of effective implementation in a governance context, a legislative approach could be considered.

Against that background we are keen to explore with you your organisation’s practices relating to clearance procedures and prohibition on trading in particular periods.

1. Does your company have clearance procedures for allowing trading in the company’s securities?

a) Yes 84%
b) No 16%

Comments:

Set out in a securities trading policy that is publicly available.
Yes, clearance procedures are appropriate as they act as a safeguard to ensure company officers do not trade when the company is in possession of price-sensitive information. It prevents a potentially embarrassing situation where a director might trade on the basis that he does not have access to price-sensitive information only to find that the company is in possession of such information and makes a release shortly thereafter. Channelling approval to trade requests through the chairman or secretary minimises the risk of inappropriate trading.
Approval to be sought from the CEO (for executives) and chairman (for directors) with confirmation outside blackout period and no inside information.
Approval of CEO or company secretary.
Company secretary and corporate counsel have delegated authority from the board to approve trading.
Clearance required only where the trading request is outside of a trading window. Otherwise, only a notification requirement before directors or senior executives trade in a trading window.
Not for directors.
If a director or an associate of a director wishes to trade in the company’s securities at any time the director must obtain prior written approval from (a) the chairman, in the case of directors other than the chairman; and (b) the deputy chairman, in the case of the chairman. If any executive or executive direct report or an associate of an executive or executive director report wishes to trade in the company’s securities at any time (even during a trading window), the executive or executive direct report must obtain the prior written approval of either the company secretary or the managing director and CEO. Approval will not be granted for trades that are within 12 months of acquisition (ie, no short-term trading).
Share trading policy only requires notification once the trade is done.
Directors must contact the chairman and executives are recommended to speak with the Group General Counsel.
A Securities Dealing Policy is in place plus the terms of executive contracts cover trading.
Unrestricted trading is confined to six-week periods following the release of quarterly, half-yearly and annual results to ASX, provided that during those periods no price-sensitive information exists. Specific permission of the CEO (for executives) or the chairman (for directors) is required outside these trading windows.
Designated Officers (members of the executive committee and people who receive the monthly CEO report) must notify the CEO and company secretary of intended trades and confirm they are not in possession of price-sensitive information. The same applies for directors, except notification is to the chairman and the company secretary.
Chairman to approve.
For directors, executives (direct reports to CEO) and a selected group of other senior managers.
Restricted persons can only trade for one month after the release of full and half-year results and the AGM.
All directors, officers and employees must seek clearance at any time of the year to trade in the company's securities.
Included in the company's share trading policy
Think this is important.
The company has a Share Trading Policy. In accordance with the policy, the company has appointed a nominated person to approve trading activities and to manage trading windows.
Designated persons (board and senior executives) are required to notify the chairman or company secretary of their intention to transact in the company's shares outside the blackout periods, prior to transacting.
We have an internal policy governing this.
We have a trading policy.

2. If not, why not? Comments:

Internal share trading guidelines/Corporations Act insider trading provisions are sufficient.
Not needed.
I don’t agree with it as it is subtly shifting the responsibility from the director to the company.
Not previously been considered.

3. If yes, does your clearance procedure (tick which apply):

i)    include information on who must be contacted within the company to provide such clearance?   100%
ii)   specify the circumstances in which clearance will be supplied or denied?     75%
iii) specify what form of notification is required before trading takes place?     69%
iv) other       8%

Comments:

Requires a form to be signed in which the person wishing to trade warrants that they do not have any inside information.
Requires the dealing to take place within two business days of receiving clearance, and requires the person to notify the company of the dealing.
Designated persons (board and senior executives) are required to notify the chairman or company secretary of their intention to transact in the company's shares outside the blackout periods, prior to transacting.

4. Does your company trading policy specify how many days are available for trading once clearance has been provided?

a) Yes 56%
b) No 44%

5. If yes, how many days are permitted?

a) No more than two days after clearance    33%
b) No more than five days after clearance    19%
c) Other     48%

Comments:

We advise when approving a request that the clearance lasts for one week.
No more than ten business days after clearance.
Ten days after receipt of a ‘No Objection’ notice.
Two days is too short. Normally five days would be sufficient.
No more than ten days.
Except that clearance for directors is not required.
There is scope whereby trading approvals may be given subject to terms and for a specified period, such as within a number of days.
It’s common practice for clearance to apply for the next seven days.
We have 14 days or other nominated period, with the overriding proviso that no dealing can occur if in possession of insider information.
Can trade in a one-month window.
Each clearance given will be reviewed separately so the period of time is variable.
Depends on the circumstances.
Trading must occur within seven days.
Up to the end of the approved trading period.

6. Does your company trading policy also list the following as being caught by the company rules on trading in company securities? (Tick which apply.)

a) Spouses                     46%
b) Dependents                24%
c) External consultants     0%
d) Advisers                    9%
e) Other                        21%

Comments:

Already known.
Policy covers ‘associates’ within the meaning of the Corporations Act.
All of above.
We use the definition as ‘controlled’; if you are able to influence the decision of anyone by default they are also caught under out policy.
No.
All contractors to the company and its subsidiaries. Employees of and contractors to the company's joint ventures.
Any persons whose securities are controlled by the staff member or director.
All the above apply to our company's securities trading policy. The company's policy also extends to all associates, which is any person or entity which might in the circumstances be reasonably associated with the company or any of its directors, employees, contractors or associates (eg, spouses, dependent children, family trusts, family companies, or joint venture partners — referred to in the policy as ‘associates’).
Spouses and dependants.
Spouses and dependents are caught unless they can establish that they make independent investment decisions.
Spouses and dependents.
The policy covers any relative of a director, executive or other relevant employee over which they have a significant influence.
Applies to spouses, dependents and any party whom staff may be deemed to control or significantly influence.
Directors, executives, employees and their associates.
Plus dependents.
Spouses and dependents.
All of the above depending on the circumstances.
It is impractical and unworkable to seek to govern dealings by people who are not employees, eg, spouses. This is particularly an issue due to self-managed super funds. The company operates its policy on the basis that clearance must be sought for dealings in the employee's ‘beneficial interests’ which would capture dealings in shares registered in the names of dependents or spouses but which are really to the account of the employee.
Covers all of the above.
‘Restricted Person’ means: directors; designated employees; CEO) or company secretary; all members of the executive; all direct reports to members of the executive; all employees employed or engaged in the administration and finance department; all employees employed or engaged in the IT Department; any other employee(s) designated as a Restricted Person by the company secretary from time to time for the purposes of the policy; all immediate family members of directors and designated employees; and companies, trusts and entities controlled by any of the above.

7. Does your company trading policy specify whether (tick which apply):

i)   stock lending is included in the definition of dealing?   52%
ii) directors and executives are able to undertake any form of short-term trading?   81%
iii) disclosure to the company of margin lending or the use of securities of the company as collateral for any purpose is required?    77%

Comments:

None of the above are permitted.
Short-term trading is prohibited (less than nine months). Margin lending must be disclosed.
Short-term (three-month) dealing is not permitted.
It is important to include all three of the above.
All of the above are precluded.
ii) and iii) are expressly prohibited.
No short-term trading is permitted. Exception is provided for the conversion of options/sale of shares as part of the one transaction.
(iii) follows (i). Clearance is required for using shares as security in hedging arrangements.
We have separate margin lending disclosure protocols.

8. What exemptions apply to your clearance rules?

i)   Genuine financial hardship      85%
ii) Potential tax liability               15%
iii) Court order or equivalent       31%
iv) Margin call                            8%
v) Other, please specify           19%

Comments:

All of the above.
Nil.
Discretion.
There are no exemptions and should not be any as there are no exemptions from insider trading. How it looks to the market matters too, so there can be no exemptions.
Circumstances are not specified. Approvals will only be granted in exceptional circumstances. Whether circumstances are deemed exceptional will be determined on a case-by-case basis by the chairman, deputy chairman, managing director and CEO and company secretary, as applicable.
No exemptions apply.
Chairman’s discretion.
Policy does not allow for exemptions.
Approval must be sought from the chairman in all cases of special circumstances.
(i) is in our Rules but would never be applied. A company cannot prevent dealings to satisfy (iii) or (iv). (ii) should only be an issue relating to the tax on the shares in question rather than a general tax liability unrelated to the shares. The company provides information about taxation to participants in its share plans so that employees understand the taxing time and that their liabilities may not be able to be met by selling the shares due to dealing restrictions.
Severe financial difficulty or if there are other exceptional circumstances. Severe financial difficulty would not normally include a liability to pay tax unless the person has no other means of satisfying the liability.
A Restricted Person who is not in the possession of inside information in relation to the company may be given clearance to deal outside of any black-out period, in situations where he or she would otherwise be prohibited by the policy from doing so, if he or she is in severe financial difficulty or where there are other exceptional circumstances. Clearance may be given for such a person to sell (but not to purchase) securities. The determination of whether the person in question is in severe financial difficulty or whether there are other exceptional circumstances can only be made by the chairman of the board, or in his absence, the chairman of the board Audit and Risk Committee. A person may be in severe financial difficulty if he or she has a pressing financial commitment that cannot be satisfied otherwise than by selling the relevant securities. A liability of such a person to pay tax would not normally constitute severe financial difficulty unless the person has no other means of satisfying the liability. A circumstance will be considered exceptional if the person in question is required by a court order to transfer or sell the securities or there is some other overriding legal requirement for him or her to do so.
No exemptions applicable. Each request will be judged on its merits.

9. Do you believe that the person designated by the company to grant a waiver should be required to consult with the ASX first?

a) Yes 2%
b) No 98%

Comments:

Would make no sense. The company executive understands the company's trading rules best as well as internal flags re inside information.
There should be no waivers — other than being allowed to trade when trades are allowed.
The designated person within the company will be very senior and experienced in such matters, and it is consistent with the current disclosure practices.
Policy is sufficiently clear and tight.
Not necessary.
Set out clearly the circumstances for allowing a waiver and, in the case of directors' dealings, disclose the reason for the trade when disclosing the trade to the market.
Optional.

10. Does your clearance process require the company to maintain a record of all dealing approvals given?

a) Yes 70%
b) No 30%

Comments:

Senior executives and directors are required to advise dealings.
Not required, but a record is kept.
It is easy to keep a file containing written requests and replies to those requests, and this should be mandatory.
Not specified in the policy.
We require these to be maintained together with names of insiders for a period of five years.
Approval as such is not given — rather an acknowledgment that employee proposes to deal and employee has signed off that they have no inside information. A copy of all acknowledgements is maintained.

11. Does your organisation have in place restrictions on trading (tick which apply):

a) blackout periods?  68%
b) trading windows?  53%
c) neither                13%

12. If not, why not? Please comment

a) Yes 92%
b) No 8%

Comments:

My firm has a no objection policy, ie, trading can occur at any time as long as directors/executives declare that they are not in possession of sensitive information and subsequently obtain a no objection approval from the comp. secretary.
Trading is only permitted in three specified windows (45 days after half-year results, annual results and the AGM).
We have a trading window policy which allows trading only in windows after half and yearly results and the AGM. By definition this includes prohibition on trading in blackout periods.
All directors, executives or executive direct reports, and any of their associates are restricted from trading at any time, even during a trading window, unless they have the necessary written approval to trade during a trading window.

13. Which of the following has your company designated as a blackout period (tick which apply):

i)   company is involved in corporate transactions that might have a material impact on the share price   67%
ii) the period following the close of books until at least one trading day after the release of results (to allow time for the market to digest the results   80%
iii) other, please specify:  23%

Comments:

End of each month until two days after monthly information is released to the market.
Do not have blackout periods.
Period following close of books not specifically stated, but is effectively so as clearly not in trading window.
Re ii) the period should be at least two days after the release of results.
Our company specifies trading windows (not blackout periods).
Trading windows are specified.
We have the definition of a prohibited period.
Trading is only allowed in three designated short windows: annual and interim results announcements and after the AGM.
ii) Ten trading days before and after release.
Directors and executives are bound by ‘close periods’ before annual and interim results and when the company has inside information. Other insiders not involved in the material transaction or the results preparation may still seek and be given clearance to deal during these times so long as they do not hold inside information.
Period between close of books and the release of results to ASX. And the CEO may declare blackout periods from time to time.
(i) is by definition inside information.
The first month of each quarter until two business days after the quarter report is released.

14. Do you believe that the clearance processes and restrictions in trading periods described here should be:stion

a) left to the company to decide if they wish to introduce them    37%
b) not mandatory, but subject to an ‘if not, why not’ regime    55%
c) legislated    8%

Comments:

It establishes a common ground for all listed companies and ensures consistency amongst these companies.
As long as the recommendations take into account the operation of windows policies as they are generally more restrictive than blackouts.
Above all, it must be remembered that these requirements apply to individuals and not the company, and any legislative changes need to cognisant of this and not shift the onus of proof which executives and directors could later hide behind.
Top 200 companies definitely should have these processes. Smaller companies — could not comment.

15. My company is in:

a) the ASX top 50                44%
b) the ASX top 50—100         8%
c) the ASX top 100—200      19%
d) the ASX top 200—300     28%